Archive for November, 2010

Glance: A look at jobless aid that’s set to expire

Tuesday, November 30th, 2010 | Finance News

Nearly 2 million Americans will stop getting unemployment checks next month — unless Congress votes to renew extended jobless benefits by Nov. 30. Here's a guide to unemployed benefits and the looming aid cutoff.

Q: Who qualifies for unemployment benefits?

A: People who lose their jobs through no fault or choice of their own. Workers who resign voluntarily or who lose their jobs for poor performance or misconduct don't qualify. States run the programs under federal guidelines and also apply their own rules for eligibility. Laid-off workers also must meet certain income requirements set by the states. That can make it hard for census and other temporary workers to qualify. The unemployed receive benefits from the state where they worked even if they live somewhere else.

Q: How big are the unemployment checks?

A: The average weekly payment is $302.90. But it ranges from a low of $118.82 in Puerto Rico to a high of $419.53 in Hawaii. Each state sets the amount of an unemployed worker's check through a formula meant to replace a portion of the old income. Nationwide, the average check replaced 46.9 percent of a jobless worker's old pay, according to government data.

Q: What are extended unemployment benefits?

A: Traditional state jobless benefits run up to 26 weeks. But the jobless can receive unemployment checks longer through two separate programs:

__ A permanent federal-state program, called Extended Benefits (EB). It offers 13 more weeks of aid in states whose jobless rate is at least 6.5 percent, plus seven more weeks in states where joblessness is at least 8 percent. Ordinarily, the federal government splits the cost of the EB program with the states. But the federal government has paid the entire bill since 2009.

__ A temporary Emergency Unemployment Compensation (EUC) program that Congress created in 2008. It provides up to 53 weeks of additional benefits — 34 weeks in all states, 13 weeks in states with unemployment rates between 6 percent and 8.5 percent and six more weeks in states where unemployment is at least 8.5 percent.

All told — 26 weeks of regular unemployment, up to 20 weeks of EB and up to 53 weeks of EUC — the unemployed can receive up to 99 weeks of benefits.

In the first week of this year, more than 12 million people were receiving unemployment benefits — the most since Labor Department records began in 1986. About half were on the regular 26-week program, about half on an extended-aid program.

Q: What happens if Congress lets the extended benefits expire Dec. 1?

A: Once their 26 weeks of state aid expire, the jobless will either be cut off or moved into the extended benefits program, depending on their state.

The jobless who are receiving checks through the EUC program will see those benefits phased out. After that, they'll lose all benefits or in some states will enter the Extended Benefits program for additional weeks of benefits.

According to a count by the National Employment Law Project, 26 states will phase out extended benefits between Dec. 4 and Jan. 1. Ten states guarantee extended benefits when unemployment is high, no matter what Congress does. They are Alaska, Connecticut, Kansas, Minnesota, New Jersey, New Mexico, North Carolina, Oregon, Rhode Island and Washington state.

Regardless, the impact of a cutoff would be swift: The Labor Department estimates 635,000 would be cut off the week that ends Dec. 11, more than 1.6 million by Christmas and 1.98 million people would lose all benefits by Jan. 1. The figure would rise to 3.29 million by Jan. 29.

People who have run out of benefits often turn to other sources of support, such as food stamps. The number of food stamp recipients is already at a record-high 42.4 million.

Source

Euro periphery hammered, Portugal warns on banks

Tuesday, November 30th, 2010 | Finance News

photo

LISBON/DUBLIN (Reuters) – The euro zone's debt crisis deepened on Tuesday as investors pushed the risk premiums on Spanish and Italian bonds to euro lifetime highs and Portugal warned of the risks facing its banks.

The euro dipped to its lowest level against the dollar in over two months, immune to new attempts by European policymakers to calm markets hell-bent on testing the EU's determination to shield its financially weak members.

Two days after the bloc approved an 85 billion euro ($111.7 billion) emergency aid package for Ireland, worries about Portugal and Spain persisted and the borrowing costs of countries like Italy, Belgium and France shot higher.

Markets are already discounting an eventual rescue of Portugal although, as Ireland did, it says it requires no outside help.

Should its much larger neighbor Spain require assistance, it would sorely test the resources of the bloc and raise questions about the integrity of the 12-year old single currency area.

"Markets are very nervous and may even target situations that do not warrant such excessive worrying, hence no one can really predict," Tomasso Padoa-Schioppa, a former Italian finance minister and ECB member, told a Greek newspaper when asked whether the EU would be able to save Spain.

"In my opinion, conditions in Spain are such that there is absolutely no reason to expect that it will be targeted. I repeat, however, that markets are in a very nervous mood."

Italy, which most analysts see as at lesser risk, is now being referred to as "too big to fail" and "too big to bail."

The euro dipped below $1.30 for the first time since mid-September and the yield spreads of 10-year Spanish, Italian

and Belgian bonds over German benchmarks spiked to their highest levels since the birth of the euro in January 1999.

The cost of insuring most euro zone government debt against default rose and European shares banking shares fell over 1 percent in nervous trading.

"INTOLERABLE RISK"

Portugal's central bank warned overnight that its country's banks faced an "intolerable risk" if the government in Lisbon failed to consolidate public finances and urged financial institutions to reinforce their capital in the coming years.

Although the minority Socialist government in Portugal approved an austerity budget for 2011 last week, it is struggling to meet its targets for deficit reduction, with the core state sector shortfall widening 1.8 percent in the first 10 months of this year.

Troubles in Portugal could spread quickly to Spain because of their close economic ties.

The German economy has been robust this year on the back of rising exports and surprisingly strong domestic demand, but countries like Greece, Ireland, Portugal and Spain face little or no growth and high unemployment.

Ireland faces a particularly daunting task in meeting the terms of its bailout and cleaning up its battered banks. Irish bank debt spreads continued to widen on Tuesday despite the rescue.

In addition to the bailout, European leaders approved on Sunday the outlines of a long-term European Stability Mechanism (ESM), based on a Franco-German proposal, that will create a permanent bailout facility and make the private sector gradually share the burden of any future default.

The new mechanism could make private bondholders share the cost of restructuring a euro zone country's debt issued after mid-2013 on a case-by-case basis.

Eurointelligence, an online commentary service, said markets were growing increasingly concerned about the solvency of euro zone peripheral states after focusing mainly on their immediate liquidity problems in past weeks.

Reflecting EU concerns about Greece's ability to pay back the loans in a 110 billion euro EU/IMF bailout agreed back in May, it was given a six-year repayment extension to 2021 at the price of a higher rate of interest.

(Writing by Noah Barkin, editing by Mike Peacock)

Source

Europe debt fears drive up yields in Spain, Italy

Tuesday, November 30th, 2010 | Finance News

photo

MADRID – The yields on government bonds from Spain and Italy are rising on worries that Europe's debt crisis will spread and put pressure on other fiscally weak countries.

Yields on Spain's 10-year bonds jumped as high as 5.7 percent by midmorning Tuesday, making for a euro-era record difference of 305 basis points against the benchmark Germany 10-year bond, which had a yield of about 2.7 percent.

The spread on Italy's 10-year bond rose to 210 points, also the highest since the launch of the euro. Portugal, whose yields soared last week, saw its spread remain steady.

Spain and Portugal have continually denied they will need a bailout like Ireland and Greece but markets in recent weeks have not been convinced.

Source